Blockchain and IoT: Why They Depend on Each Other

The other week, I posted a
message on LinkedIn to call out Dell Technologies on its recent, high-profile
announcement of an Internet of Things (IoT) initiative.

The tech giant plans to invest
$1 billion in IoT developments over the next three years, CEO Michael Dell told
an audience at a corporate event in New York City. But it seems that none of
that money will go toward blockchain initiatives, as the technology was never
mentioned during any of the presentations.

Somewhat to my surprise, a
number of people pushed back on my snarky message with the view that blockchains
and IoT have nothing to do with one another. That made me smile a bit, not
least since a few days later I hosted Zaki Manian, executive director of the Trusted IoT Alliance at a meetup in
Austin, Texas. The fact is, blockchain and IoT technologies have much to align
and relate them.

To set the scene, the Trusted
IoT Alliance — which began informally late in 2016 before its official launch in
September 2017 — has a mission to secure IoT devices using standard
cryptographic techniques and to “enable trust in the data produced by IoT systems in a distributed
ledger/blockchain agnostic fashion.” An additional goal is to create a standard
smart contract interface between IoT devices and different blockchain
implementations.

The founding members of the Trusted IoT
Alliance include networking giant Cisco Systems, leading IoT sensor vendor
Bosch and security expert Gemalto. Other founders include supply chain-oriented
blockchain startups Chronicled and Skuchain (which is where Manian worked as
the CTO before taking on his current role); ConsenSys (because it tends to be everywhere
that Ethereum is); and IOTA, which is building a blockchain platform
specifically to connect IoT devices.

One early project involving blockchains
and IoT technology points not only to the promise of uniting these
technologies, but also illustrates the technical challenges involved and how
they can be overcome. It involves startup Factom, which has built a blockchain overlay network for securing
large amounts of data and its customer, the U.S. Department of Homeland
Security (DHS).

The DHS application involves cameras
placed along the U.S. borders with Canada and Mexico. Data retrieved and
streamed from these devices — including device identity and video footage — is
captured by Factom’s network which, through a hierarchical hashing process
called a “Merkle tree,” condenses it into a single hash that can be stored on
the Bitcoin blockchain.

Bitcoin’s function — since the global
public network is virtually tamper proof — is to anchor the data collected so
that if it is later modified, any such change can be readily detected. As such,
hacker attacks on cameras and altering of video can be detected. On top of the
added security, the integrity of the camera network and the video it generates
is provable in any later legal proceedings.

The use of Factom’s overlay network
technology is notable, since it solves a technology challenge that is well understood
in blockchain circles. IoT devices can generate lots of data and generate it at
a fast rate, so simply storing that data directly on the Bitcoin (or Ethereum)
blockchain would overwhelm it quickly.

Factom’s network acts as a middleware component to stage masses of data from
input devices and store hashes of it periodically on a secure blockchain. Other
technologies, such as messaging middleware and stream processing applications,
from the likes of IBM, SAP and TIBCO Software, might also be architected to
ease the integration of IoT and blockchain technology.

In addition to the Factom and DHS pilot, the marriage of IoT devices and
blockchains is being trialed by a number of vendors focused on various aspects
of supply chain automation.

One early example was demonstrated by Skuchain, a Silicon Valley startup
involved in the financing of trade. In October 2016, it was involved in a pilot
involving the shipment of bales of cotton from the U.S. to China. Both the
Commonwealth Bank of Australia and Wells Fargo were involved in the financing,
which saw payments being initiated via an Ethereum smart contract based on data
from a GPS-enabled sensor that issued an alert when the cotton reached China.

Meanwhile, Chronicled, another West Coast startup, has
created a solution for monitoring so-called cold chains — essentially
temperature-controlled transportation, which is used to ship fresh foods and
pharmaceuticals. The Chronicled’s solution combines a low-cost temperature
sensor that can be read via near-field communication technology by a smartphone
with data being stored on a blockchain (such as Ethereum, Quorum or Hyperledger
Fabric).

Across the pond, the Swiss-based Ambrosus is developing a
blockchain-based tracking and community ecosphere for the food and
pharmaceutical industries. It is also marrying Ethereum blockchain and smart
contract technologies with IoT devices that determine location and measure
temperature, as outlined in a recent blog
post.

Beyond these early examples, there’s little
doubt that major IT players like IBM, Oracle and SAP are also actively working
on the marriage of IoT and blockchain technologies. Dell, though, seems pretty
much in the dark when it comes to blockchains.